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Tough rules needed on insider trading and market manipulation
April 12, 2012--Proposed legislation to tackle insider trading and market manipulation must not fragment markets, because this would make such abuses even harder to detect, said Economic and Monetary Affairs Committee MEPs debating them on Thursday. Cross-border trading calls for cross-border cooperation among regulators, and tiny financial boutiques with billion euro turnovers should not be exempted, they added.
"We need to be very tough on market abuse and market manipulation. Our purpose is to improve and clarify", said rapporteur Arlene McCarthy (S&D, UK), presenting her draft report on the proposed legislation
Limiting market fragmentation
Ms McCarthy believes that increased market fragmentation makes it more difficult to detect manipulation, and she won broad support from her colleagues for her wish to remove so-called "organised trading facility" (OTF), category from the Commission proposal.
MEPs felt that this category - of facilities operated by investment firms or market players, that bring together buyers and sellers or orders relating to a financial instrument - was not well enough defined and would enable yet another type of player to enter a market that is already complex and hard to control.
"It will be nevertheless very useful to have a clear definition of OTF" said Sirpa Pietikäinen (EPP, FI). Wolf Klinz (ALDE, DE), countered that removing the OTF category would contradict the proposal's aim to cover all kinds of financial markets.
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Source: European Parliament
Quantitative impact study results published by the Basel Committee
April 12, 2012--The Basel Committee published today the results of its Basel III monitoring exercise. The study is based on rigorous reporting processes set up by the Committee to periodically review the implications of the Basel III standards for financial markets. A total of 212 banks participated in the study, including 103 Group 1 banks (ie those that have Tier 1 capital in excess of €3 billion and are internationally active) and 109 Group 2 banks (ie all other banks).
While the Basel III framework sets out transitional arrangements to implement the new standards, the monitoring exercise results assume full implementation of the final Basel III package based on data as of 30 June 2011 (ie they do not take account of the transitional arrangements such as the phase in of deductions). No assumptions were made about bank profitability or behavioural responses, such as changes in bank capital or balance sheet composition. For that reason the results of the study are not comparable to industry estimates.
Based on data as of 30 June 2011 and applying the changes to the definition of capital and risk-weighted assets, the average common equity Tier 1 capital ratio (CET1) of Group 1 banks was 7.1%, as compared with the Basel III minimum requirement of 4.5%. In order for all Group 1 banks to reach the 4.5% minimum, an increase of €38.8 billion CET1 would be required. The overall shortfall increases to €485.6 billion to achieve a CET1 target level of 7.0% (ie including the capital conservation buffer); this amount includes the surcharge for global systemically important banks where applicable. As a point of reference, the sum of profits after tax and prior to distributions across the same sample of Group 1 banks in the second half of 2010 and the first half of 2011 was €356.6 billion.
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Source: BIS
NYSE Euronext Monthly ETF Activity Report - March 2012
April 11, 2012--Listings
In March, NYSE Euronext welcomed 2 new ETFs to the Paris market, one from Lyxor and another from Ossiam:
|
March 2012 ETF Listings | |||
| ETF Symbol | Listing date | ETF Trading name | Underlying index |
| LVIX | 15/03/2012 | LYXOR LVIX | SP 500 VIX Futures Enhanced Roll |
| EMMV | 22/03/2012 | OSSIAM EM MINVAR E | Ossiam Emerging Markets Minimum Variance |
In total, at the end of March, NYSE Euronext had 695 listings of 597 ETFs from 16 issuers.
Trading activity
While trading activity in March still lagged considerably compared with the same period last year, the first quarter 2012 ended on a positive note with an upward trend. Overall ETF trading activity on NYSE Euronext bounced back from the lowest levels since May 2007:
visit http://etp.nyx.com for more information
Source: NYSE Euronext
Esma must clarify ETF rules, say fund managers
European plans for exchange traded fund (ETF) regulation are blurring the lines between active and passive management, according to a consultation.
April 11, 2012--The European Securities and Markets Authority (Esma) closed its consultation on ETF regulation within Ucits rules on April 3, having received several responses calling for greater clarity regarding its definitions.
Research body Edhec Risk Institute said Esma should specify a limit on the maximum tracking error allowed in a passive fund in order to “frame” which funds were passive ETFs.
“For an index to be considered representative of passive management, its ground rules should leave no room for implicit, let alone explicit, discretionary choices,” Edhec’s response stated.
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Source: FT Adviser
The AMF complies with the ESMA guidelines on automated trading
April 11, 2012--The AMF has included the ESMA guidelines1 on automated trading in its position no. 2012-03 published today, the provisions of which will apply from 7 May 2012.
These guidelines, issued on the basis of the Market in Financial Instruments (MiFID) and Market Abuse directives, set out the methods for implementation of certain provisions of these directives and their implementing directive in the particular field of automated trading systems, most notably high frequency trading.
They mainly concern the following activities:
The operation of an electronic trading system by a regulated market or a multilateral trading facility
(MTF);
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Source: AMF
Italy borrowing costs double as euro debt concerns resurface
April 11, 2012--Italy's borrowing costs doubled in a closely-watched bond auction on Wednesday that raised 11 billion euros ($14 billion) in short-term debt, as tensions returned to eurozone bond markets.
Eight billion euros in 12-month bonds were sold at a rate of 2.84 percent -- far higher than the 1.492 percent paid in March while three billion euros due July 2012 went at 1.249 percent compared to 0.492 percent last month.
Borrowing costs had been on the decline in recent months after Prime Minister Mario Monti came to power in November, replacing Silvio Berlusconi who was ousted by a parliamentary revolt and a wave of financial market panic.
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Source: CityWire
DB - Equity Research- Equity Research - Europe-Weekly European ETF Market Monitor
April 11, 2012--The Weekly European ETF Market Monitor includes key statistics on the European ETF market as well as global ETF market highlights..
For more detailed coverage please refer to the monthly report, issued in the first week following the end of each month
The following link will be available for 90 days. For more information, please click on the link for the full PDF. If you have any trouble viewing the link, copy and paste the link in a browser. http://pull.db-gmresearch.com/p/400-1330/96007814/ETF_Research.pdf
Source: Source: Christos Costandinides, European Head of ETF Research & Strategy, Deutsche Bank
Source and Nomura Expand Tactical Volatility Offering
April 10, 2012--April 2012--Source and Nomura have today announced the launch of the Nomura Voltage Short-Term Source ETF (the "ETF"). The ETF aims to provide responsive and tactical exposure
to volatility by tracking the Nomura Voltage Strategy Short‐Term 30-day USD TR Index, an index which seeks to capture spikes in volatility while reducing associated slide costs.
This is the second Source ETF in the Nomura Voltage series. The Nomura Voltage Mid‐Term Source ETF, which tracks the Nomura Voltage Strategy Mid‐Term 30‐day USD TR Index, was launched in April 2011 and now has assets of over US$ 542 million. Both ETFs are available to sophisticated investors, providing them with different volatility investment options to better manage their risk/return profile.
Futures on the CBOE Volatility Index (the “VIX”) are a convenient way to obtain exposure to volatility. However, because VIX futures often suffer from contango1, maintaining that exposure over the long term can be costly. The Nomura Voltage Strategy Short‐Term 30‐day USD TR Index offers an efficient alternative for investors seeking a long position in volatility. The index reflects exposure to volatility via the S&P 500 VIX Short‐Term Futures Index TR, but varies the level of exposure from 0% to 100% based on the Nomura Voltage allocation model. In this way, the index aims to capture spikes in volatility, whilst mitigating the cost of rolling VIX futures.
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Source: Nomura
In response to ESMA consultation paper on ETFs, EDHEC-Risk Institute calls for improved transparency, governance and auditability of indices
April 10, 2012--In commenting on the ESMA Consultation Paper entitled "ESMA’s guidelines on ETFs and other UCITS issues" (ESMA/2012/44, January 2012), EDHEC-Risk Institute has welcomed the broadened focus of this new consultation, which goes a long way towards approaching important issues in a horizontal way across all UCITS, rather than in a vertical way limited to UCITS ETFs,
but regrets that the consultation paper has not gone further in several key areas:
While underlining the differences between passively and actively managed funds and proposing more disclosures on tracking error, the consultation paper falls short of giving a definition of passive management that would be framed in terms of a limit on the maximum level of tracking error acceptable.
EDHEC-Risk strongly believes that for an index-tracking vehicle to be considered a passive investment vehicle, it is also necessary that the underlying index be a financial index whose composition is dictated by a set of pre-determined rules and objective criteria allowing for strict systematic implementation. For an index to be considered representative of passive management, its ground rules should leave no room for implicit, let alone explicit, discretionary choices.
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Source: EDHEC
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